Introducing the 2x and Inverse BTC Flexible Leverage Indices

The Index Coop is excited to announce the launch of two new Polygon-native Flexible Leverage Indices (FLI) - BTC2x-FLI-P and iBTC-FLI-P

Just like the other FLI tokens, BTC2x and Inverse BTC are structured products in ERC-20 format that enable traders to automate leveraged exposure in a completely decentralized manner. BTC2x targets a long 2x exposure to BTC and Inverse BTC targets a short -1x exposure to BTC, and both employ a flexible leverage ratio for optimal rebalancing outcomes.

The FLI suite is built in collaboration with Scalara (formerly Pulse, Inc.) to minimize the risks and costs associated with maintaining collateralized debt positions. BTC2x-FLI-P and iBTC-FLI-P are now available to be minted on TokenSets Polygon with an initial supply cap of 250k tokens each.

In this post, you will learn:

• The Benefits of Both BTC Tokens

• Understanding the Methodology

• Other Resources

Leverage is one of the most popular use-cases for DeFi. However, legacy processes for creating leverage positions in DeFi are not for the faint of heart. Users must monitor health ratios, manage collateral and debt positions, and risk liquidation during downturns. For example, volatile Bitcoin price action caused $10b worth of liquidations earlier this year. Using FLI tokens is a simpler and safer alternative to manual leverage methods.

Four Major Benefits to Using BTC2x or Inverse BTC:

There are 4 major benefits to using BTC2x or Inverse BTC:

• Decreased (though not eliminated) risk

• Lower gas fees

• Ease of use

• Composability with DeFi protocols

1. Decreased Risk

Leveraged products are inherently risky. BTC2x-FLI-P and iBTC-FLI-P decrease that risk for you by programming the leverage ratio to recenter automatically at predefined intervals. This allows the products to absorb major volatility spikes, and rebalance in a flexible manner to ensure collateral levels stay above liquidation thresholds. FLI tokens also utilize an emergency de-levering mechanism —referred to as ‘ripcord’ — as another safety layer in case of black swan events. Additionally, because FLI products are over-collateralized, there is a better risk profile compared to products that use synthetic leverage.

Another benefit of FLI tokens is their redeemability. They are the first fully-collateralized leverage tokens that can be minted or redeemed for the underlying components: BTC and USDC. This allows token holders to handle the underlying assets and debt positions however they would like, rather than simply exchanging the token for a separate, singular asset.

2. Lower Fee Burden

FLIs also minimize gas costs associated with rebalancing by utilizing a unique algorithm that increases rebalancing efficiency by an order of magnitude. Additionally, the token’s 1.95% (annualized) streaming fee is considerably less expensive than alternatives on centralized exchanges that can charge upwards of 10% annually, and there is also no slippage due to composable entry and exit. Also, because BTC2x-FLI-P and iBTC-FLI-P are Polygon-native tokens, it can be easily minted with negligible fees through the TokenSets website.

3. Ease of Use

Best of all, the Flexible Leverage Index tokens are exceedingly easy to use. Simply buy and sell like you would any other token on Slingshot for collateralized debt management abstracted into a single token! BTC2x and Inverse BTC rebalance your leverage position for you, so liquidation risk is lower and constant monitoring is not required.

4. Composability

Because both tokens are fully collateralized ERC-20 Set tokens, it can be integrated into a number of different DeFi protocols and platforms to expand its utility and use cases.

Under the hood, both tokens are built on Aave Polygon, the borrowing / lending protocol that enables the creation of over-collateralized debt positions. See this article for more information around how FLI products utilize composability.

Understanding the Methodology

Like all Index Coop products, BTC2x-FLI-P and iBTC-FLI-P follow a strict methodology. Pulse, Inc. has published a detailed breakdown for FLI - Introducing the Flexible Leverage Index - and TokenSets has shared technical details here.

Initial parameters for BTC2x-FLI-P:

• Underlying Asset: WBTC

• Borrow Asset: USDC

• Target Leverage Ratio: 2.0

• DeFi Lending Protocol: Aave Polygon

• Maximum Leverage Ratio: 2.2

• Minimum Leverage Ratio: 1.8

• Rebalance Interval: every 4 hours

• Recentering Speed: 2.5%

Initial parameters for iBTC-FLI-P:

• Underlying Asset: USDC

• Borrow Asset: WBTC

• Target Leverage Ratio: 2.0 (-1.0 short)

• DeFi Lending Protocol: Aave Polygon

• Maximum Leverage Ratio: 2.2 (-1.2 short)

• Minimum Leverage Ratio: 1.8 (-0.8 short)

• Rebalance Interval: every 4 hours

• Recentering Speed: 2.5%

More information on FLI product parameters can be found here.

Other Resources

Fees

Both BTC tokens will have a streaming fee of 1.95% (195 basis points) and a 0.1% mint /redeem fee.

How to Buy

• BTC2x-FLI-P:  Slingshot (DEX Ag)  |  TokenSets |  Uniswap

• iBTC-FLI-P:  Slingshot (DEX Ag)  |  TokenSets |  Uniswap

Liquidity

The Index Coop has launched the following pools on Uniswap v3 Polygon:

• BTC2x-FLI-P / wBTC

• iBTC-FLI-P / wBTC

Frequently Asked Questions

• What’s the difference between FLIs on main net and FLIs on Polygon?

• How do you Issue or Redeem a Leveraged Set?

• How do Leverage Tokens Work?

Resources

• Flexible Leverage Index — Pulse, Inc

• IIP-119: Launch iBTC, iETH, BTC2X, iBTC FLIs on Polygon

• Understanding the Risks of Owning FLI Tokens

• How Volatility Drift Affects FLI Products

• A Beginners Guide to Using Flexible Leverage Index Tokens

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